> The Chinese Saga of Olympic Shame Continues.... A Chinese reformer
> betrays his cause, and pays
>
> International Herald Tribune
>
> A Chinese reformer betrays his cause, and pays
>
> By David Barboza
> Thursday, July 12, 2007
>
> BEIJING: Zheng Xiaoyu once ranked as one of the most powerful regulators
> in China. He rose from modest beginnings to help create and lead
> Beijing's version of the Food and Drug Administration in the United
> States.
>
> But last March, locked up in the Qincheng Prison here, he wrote a short
> confession. "Why are the friends who gave me money all the bosses of
> pharmaceutical companies?" he wrote in his letter, entitled How I Look
> on My Mistakes. "Obviously because I was in charge of drug
> administration."
>
> In his confession, Zheng acknowledged that during his eight-year tenure,
> he had accepted gifts and bribes from eight drug companies that sought
> special favors: a car, a villa, furniture, cash. And corporate stock.
> All told, he and his family accepted gifts valued at more than $850,000
> - in a country where the average worker earns less than $2,000 a year.
>
> For his crimes, the 62-year-old was executed on Tuesday, making him one
> of the highest-ranking Chinese officials ever to be put to death.
>
> The rise and fall of Zheng offers a rare glimpse inside China's flawed
> regulatory system. He started out as an idealistic reformer. Concerned
> about China's unsafe drug supply, he lobbied for the creation of the
> State Food and Drug Administration. But in the end, according to friends
> and associates, he was corrupted by the very system he sought to change
> - even enlisting his wife and son to solicit bribes.
>
> "There were so many companies going to him and he simply couldn't resist
> the temptation," said one drug company executive who befriended Zheng in
> the 1980s and did not want to be identified discussing the delicate issue.
>
> While China's tainted exports have attracted international attention,
> China's own citizens suffer most from the shortcomings of its drug
> regulators. Tens of thousands of crates of unsafe pharmaceuticals have
> reached the local market - from antibiotics to vaccines, from drugs to
> treat erectile dysfunction to ones to strengthen the immune system. The
> government does not know how many deaths and serious illnesses have
> resulted from faulty drugs.
>
> Corruption is not the only problem, say industry insiders. Agencies
> battled over who had the authority to fine companies and who was
> responsible when things went wrong. The rapid growth of the drug
> industry has also made it hard for regulators and their staffs to keep up.
>
> During Zheng's tenure, for instance, his agency approved over 150,000
> applications for new drugs, an approval rate that dwarfs the FDA, which
> approves only about 140 new drugs each year.
>
> And when regulators do discover counterfeit pharmaceutical operations,
> powerful local officials often seek to shield companies in their area
> from punishment.
>
> As much as his own greed, all these larger problems stymied the
> intelligent but nai"ve Zheng. "He was smart in a technical way," says a
> drug company executive who knew him for more than 20 years. "But he
> didn't have political skills. He should have never gone into government."
>
> Zheng Xiaoyu was born in coastal Fujian Province in 1944, when China was
> still being torn apart by war. He and several siblings were raised by an
> aunt, friends say. Zheng was bright enough to gain acceptance to the
> prestigious Fudan University in Shanghai, where he studied biology and
> played the trumpet in the school band.
>
> After graduation, he got a job as a technician at the state-owned No. 1
> pharmaceutical factory in nearby Hangzhou, where he eventually rose to
> become factory manager.
>
> Colleagues remember him being passionate about his work. "He was
> innovative and liked new ideas," said one retired worker who knew Zheng
> well, but asked not to be identified. "In the 1980s, he even bought
> computers for the factory in an attempt to computerize manufacturing and
> management."
>
> Later, in the mid-1990s, Zheng took a job in the country's
> pharmaceutical regulatory administration. There he pushed the government
> to create a separate body to regulate food and drug safety, one with
> more power to protect Chinese consumers.
>
> In 1998, Beijing did. The amiable Zheng headed the state agency for the
> next eight years, pushing a modernization plan that was supposed to help
> transform China into one of the world's leading centers for
> pharmaceutical production.
>
> To improve industry standards, the agency cracked down on fake drugs and
> illegal factories. Zheng would occasionally show up at the side of
> victims to grieve and declare his own fears about product safety.
>
> He talked like a determined enforcer. "The crimes of making and selling
> fake drugs haven't been uprooted," he said in a speech in 2001. "And
> criminals and corrupt officials in the system should be severely
> punished according to the law."
>
> One of his boldest reforms was an effort to push new production
> standards, giving companies a "good manufacturing practice" seal of
> approval. Zheng promised to use the standards to weed out irresponsible
> manufacturers. His agency declared that any pharmaceutical company that
> did not get GMP approval by July 2004 would lose its license.
>
> "The intention of the GMP certification was good," says Yang Yue, a
> professor at the Shenyang Pharmaceutical University. "You don't know
> what horrible conditions some drug makers had been in. For example, in
> some traditional Chinese medicine companies, workers stirred the drugs
> with their feet."
>
> The plan had its intended impact: the industry shrank from 6,700 drug
> makers to about 4,000.
>
> But the agency's higher standards coincided with an effort by Beijing to
> curb soaring drug prices. Companies were caught between the mandatory
> government price cuts and the increased costs to upgrade equipment and
> retrain staff members to meet Zheng's modernization plan.
>
> Companies complained that because of their shrinking profit margins,
> they did not have the money to develop new drugs. Some producers
> switched to drugs not covered by the government's price caps, or simply
> changed the dosage of existing drugs to maintain higher prices,
> exploiting a loophole in the pricing regulations. And companies bribed
> agency officials to get speedier drug approvals or other special favors.
>
> Those officials included Zheng, according to court records. His wife,
> Naixue, and son, Hairong, eventually formed a consulting company in
> Shanghai that helped solicit bribes from companies.
>
> Court records show that when a company named the Double Dove Group
> sought to register disposable syringes, it offered shares to Zheng's
> wife; his son received a used Audi, consulting fees and property in
> Shanghai.
>
> When a Beijing drug maker needed approval to import more Madame Pearl's
> Cough Syrup from Hong Kong and to distribute a new intravenous drug, the
> company's chairman helped Zheng's wife pay for a villa and then went
> shopping with her for furniture. Decorating fees came to about $30,000.
>
> The court offered detailed accounts of other bribes: secret payoffs at a
> Beijing hotel, checks handed to Zheng in his office; and instructions
> for Zheng's son to fly to Hong Kong, where he got over $120,000 that he
> later told prosecutors he put away for his parents' retirement.
>
> At least eight other senior drug agency officials have been accused of
> taking bribes, according to court records and the state-controlled
> media. Zheng's top deputy, Hao Heping, the director of the medical
> devices division, accepted cash, expensive golf memberships and a Honda
> Accord.
>
> Cao Wenzhuang, head of the drug registration division, accepted at least
> $300,000 in gifts and bribes. Both men also worked with their wives to
> solicit the money.
>
> The court that handed down Zheng's death sentence said at least six
> drugs that had been approved by the State Food and Drug Administration
> during his tenure were fake. The agency's current leaders say hundreds
> of fake drugs are on the market at any given time - some approved, many
> not.
>
> According to state-run media accounts, prosecutors began hearing from
> informants about corruption at the highest levels of the SFDA beginning
> in 2002, when a drug regulator who had worked with Zheng was sentenced
> to death for corruption. (That official received a reprieve and was
> never executed.)
>
> Soon, several other agency officials came under scrutiny. One drug
> industry insider, who asked not to be named discussing government agency
> rivalries, said bureaucratic battles also worsened between Zheng's drug
> watchdog and the Ministry of Health, which had primary oversight over
> the drug market before Zheng's agency was formed. That fight, according
> to this official, could have led his rivals to inform on Zhang.
>
> In June 2005, Zheng Xiaoyu quietly stepped down as director of the State
> Food and Drug Administration. Rumors spread that he was under
> investigation.
>
> But Zheng's arrest did not come until a year later. In the meantime, he
> remained head of the China Pharmaceutical Association, even attending
> high-level government meetings, according to China Vitae, a Hong Kong
> Web site that tracks government officials.
>
> About the same time, Zheng's wife and son, sometimes at his direction,
> began returning some of the gifts they had received from drug company
> executives, including the $30,000 dividend Hairong had been paid for his
> stake in the Double Dove property. Naixue returned some of her
> consulting fees.
>
> After attending a December 2006 meeting of the Beijing Pharmaceutical
> Association, Zheng was questioned by the government's disciplinary
> agency, according to court documents.
>
> Two months later, the State Council, China's highest governing body,
> held a special meeting to consider Zheng's crimes. Prime Minister Wen
> Jiabao attended. The council was told that Zheng had "neglected his duty
> to supervise the drug market, abused the administration's drug approval
> authority, took bribes and turned a blind eye to bad practices by
> relatives and subordinate officials."
>
> Zheng was officially arrested in March. Soon after, the entire Zheng
> family was undergoing intense interrogation. All three members confessed
> to soliciting and accepting bribes.
>
> "Some money wasn't given to me directly, but through Naixue and
> Hairong," Zheng wrote in his confession. "Naixue was retired and stayed
> at home. Hairong was just a student. So their target was still me.
> Indirect ways were easier for me to accept. So I agreed, consented. This
> was bribery."
>
> Eventually, the court found him guilty of accepting bribes from eight
> drug companies, condemned him for dereliction of duty for failing to
> police the drug industry or his subordinates and creating regulatory
> schemes that allowed dangerous drugs to come to the market.
>
> Industry officials say Zheng probably accepted many more bribes, but the
> government did not need evidence of any more to ask for the death penalty.
>
> Many drug company officials still defend Zheng, arguing that he was a
> good man, undone by temptations that would have corrupted many people.
> They say that the industry was plagued by dishonesty that no regulator
> could have controlled; and that in a country where counterfeiting is
> rampant in all types of industries, where doctors and hospitals
> regularly accept kickbacks, that Zheng was made a scapegoat for national
> ills.
>
> Zheng's lawyer pleaded for leniency, saying his client had cooperated
> with the authorities and, at times at least, had actually worked to
> improve the drug industry.
>
> But on July 10, the state-run media issued a terse statement: "Zheng
> Xiaoyu, former director of China's State Food and Drug Administration,
> was executed Tuesday morning with the approval of the Supreme People's
> Court."
>
> Whether Zheng's wife and son will be tried is not clear.
>
> The day after his execution, the agency Zheng Xiaoyu had helped found
> said it was dismantling his drug approval system and putting in place
> new measures to bring transparency to the drug approval system. The
> agency also said it would start making unannounced visits to check on
> drug factory production.
>
> Industry analysts say Beijing will have to do a great deal more to solve
> the country's food and drug safety problems "If the head of the drug
> agency is corrupt," said James Shen, a longtime industry analyst in
> Beijing and the publisher of Pharma China, "you can imagine how corrupt
> the whole system is."
> Notes:
>
> International Herald Tribune Copyright (c) 2007 The International Herald
> Tribune | www.iht.com
>
>